2012-12-28 12:30:01 CET
2012-12-28 12:30:09 CET
Outokumpu Oyj - Prospectus/Announcement of Prospectus
Outokumpu - Publication of listing particulars
OUTOKUMPU OYJ
STOCK EXCHANGE RELEASE
December 28, 2012 at 1.30 pm EET
Outokumpu Oyj announced earlier today on December 28, 2012 that it will issue
621 042 572 new shares in Outokumpu to ThyssenKrupp AG. This represents 29.9%
of the outstanding shares of Outokumpu immediately following the completion of
the directed share issue.
The Finnish Financial Supervisory Authority has today approved the Finnish
language listing particulars related to the listing of 621 042 572 new shares
on the official list of NASDAQ OMX Helsinki. The Finnish language listing
particulars together with an unofficial English translation are available on
Outokumpu's website www.outokumpu.com/investors as of today.
The listing particulars contain following previously unpublished information
(terms used in this document are explained in detail in the listing
particulars):
EUR 250 Million Forward Start Revolving Credit Facility
In December 2012, Outokumpu entered into a EUR 250 million FSF with Nordea to
replace the remaining commitments under the EUR 400 million credit facility
that Outokumpu signed in April 2012, which will mature in June 2013. The new
facility will become available in June 2013 and will mature in January 2014.
Amounts drawn under the facility will bear interest at a floating rate and the
undrawn amount will be subject to a commitment fee. The facility agreement
includes customary covenants, customary events of default and a customary
change of control clause. It also includes a financial covenant based on net
gearing (as defined in the agreement) that requires Outokumpu to maintain a
level of net gearing that is equal to or lower than 115 percent before June
2013 and 95 percent thereafter. The FSF commitments shall be cancelled by each
euro in excess of EUR 750 million raised in refinancing of EUR 750 million and
EUR 400 million revolving credit facilities.
Loan Note
Pursuant to the Business Combination Agreement, the ThyssenKrupp Nederland B.V.
and Outokumpu have entered into the Loan Note agreement on the Completion Date.
The Loan Note is part of the consideration for the Inoxum Transaction and is
contractually subordinated to certain specified current and future debt of
Outokumpu in the event of an insolvency of Outokumpu. The principal amount of
the Loan Note has been calculated based on an estimate of Inoxum's Intra-Group
Financing Balance prepared by ThyssenKrupp in accordance with the Business
Combination Agreement and consists of two tranches. The initial principal
amount of Tranche A is approximately EUR 700 million, which will be adjusted
following the Completion Date as described below, and the initial principal
amount of Tranche B is EUR 550 million.
Within 15 business days after the Completion Date, ThyssenKrupp will submit its
calculation of Inoxum's Final Intra-Group Financing Balance to Outokumpu.
Outokumpu will then have 10 business days to object to ThyssenKrupp's
calculation of Inoxum's Final Intra-Group Financing Balance. If Outokumpu does
not object to ThyssenKrupp's calculation of Inoxum's Final Intra-Group
Financing Balance within the provided timeframe, it will become final and the
principal amount of Tranche A will be adjusted to reflect the difference
between (i) Inoxum's estimated Intra-Group Financing Balance prepared by
ThyssenKrupp prior to the Closing Date and (ii) Inoxum's Final Intra-Group
Financing Balance. The parties have agreed to a mechanism to resolve the
dispute if Outokumpu objects to ThyssenKrupp's calculation of Inoxum's Final
Intra-Group Financing Balance. Further, the principal amount of Tranche B will
be adjusted to account for the financial impact of the disposal of the
Divestment Assets (the difference between the fair market value and the sale
price and the amount of lost synergies). The adjustment will be calculated in
accordance with the terms of the Business Combination Agreement and cannot
exceed EUR 200 million. Once the adjustment amount has been bindingly
determined and, therefore, becomes due and payable, the adjustment will occur
on January 31, 2014, or earlier if so requested by Outokumpu, and no interest
will accrue on the adjustment amount from the time it becomes due and payable
until the adjustment occurs.
Repayments of Tranche A will begin on the fourth anniversary of the Completion
Date in accordance with an agreed repayment schedule. The Loan Note will
finally mature on December 28, 2021 (i.e., on the ninth anniversary of the
Completion Date). Interest accrues on the principal amount of the Loan Note at
a rate of three-month Euribor plus a margin (which increases over time from 4.0
percent per annum to 9.5 percent per annum). Interest is payable every three
months. Regarding Tranche A, Outokumpu has the option to capitalize up to 100
percent of the interest during the first 24 months and up to 50 percent for
months 25 through 36. After month 36, Outokumpu will not have the option to
capitalize interest on Tranche A. Regarding Tranche B, Outokumpu has the option
to capitalize up to 100 percent of the interest during the first 60 months, but
if Outokumpu capitalizes more than 50 percent of the interest for interest
periods ending during months 25 through 36 or any interest for interest periods
ending during months 37 through 60, it would have to pay a higher margin. After
month 60, Outokumpu will not have the option to capitalize interest on Tranche
B.
The Loan Note agreement contains a change of control clause that allows
ThyssenKrupp (or any assignee or transferee of any amount outstanding under the
Loan Note) to cancel their respective amount outstanding under the Loan Note,
which would then become immediately due and payable upon a change of control (a
party or group of parties acting in concert gains control (directly or
indirectly) of either (i) at least 50 percent of the issued share capital or
voting rights; or (ii) at least 30 percent of the issued share capital or
voting rights and is required to make a mandatory takeover offer) of Outokumpu,
except if ThyssenKrupp or an affiliate gains control of Outokumpu. Tranche A is
subject to mandatory prepayment of 50 percent of the net proceeds from any
disposal of assets outside of the ordinary course of business by any member of
the Outokumpu group to the extent that the aggregate net proceeds from such
disposals exceed EUR 400 million, subject to certain exceptions. Voluntary
prepayments are permitted; however, Tranche B may be prepaid only after Tranche
A has been discharged in full. The Loan Note contains a negative pledge in
relation to Outokumpu, subject to certain customary exceptions. The Loan Note
agreement contains certain customary representations, covenants and events of
default.
TK Backup Facilities
Pursuant to the Business Combination Agreement, (i) ThyssenKrupp Nederland
Holding B.V., as lender; Nirosta and VDM, as borrowers; and Outokumpu, as
guarantor, have entered into the EUR 81,524,000 Supplier Finance Backup
Facility agreement dated the Completion Date to provide financing following any
specific shortfall in commitments made available to Nirosta's and VDM's
suppliers by financial institutions under specified credit lines due to the
relevant financial institution terminating or reducing the respective credit
line or increasing the interest rate on the respective credit line above
specified limits and (ii) ThyssenKrupp Nederland Holding B.V., as lender, and
Outokumpu, as borrower, have entered into the EUR 250 million Revolving Backup
Facility agreement, dated the Completion Date, to cover increased working
capital requirements due to the Inoxum Transaction. Outokumpu guarantees the
performance of Nirosta and VDM under the Supplier Finance Backup Facility.
The TK Backup Facilities agreements contain certain customary conditions for
utilization and certain additional conditions specific to the Supplier Finance
Backup Facility. Amounts drawn on the Supplier Finance Backup Facility are
repayable one month from the utilization date and amounts drawn on the
Revolving Backup Facility are repayable three months from the utilization date,
but can be rolled over. Interest on amounts drawn under the TK Backup
Facilities accrues at a rate of Euribor plus margin. The Supplier Finance
Backup Facility agreement provides for mandatory prepayment and cancellation in
case of certain disposals outside of the ordinary course of business by the
Combined Group. The TK Backup Facilities agreements contains change of control
clauses that allows any lender under the relevant facility to cancel their
respective amount outstanding under the Loan Note, which amount would become
immediately due and payable upon a change of control (a party or group of
parties acting in concert gains control (directly or indirectly) of either (i)
at least 50 percent of the issued share capital or voting rights; or (ii) at
least 30 percent of the issued share capital or voting rights and is required
to make a mandatory takeover offer) of Nirosta or VDM, including through a
change in control of Outokumpu (in the case of the Supplier Finance Backup
Facility), or Outokumpu (in the case of the Revolving Backup Facility), except
if ThyssenKrupp or an affiliate gains control of Outokumpu). Voluntary
prepayments and voluntary cancellations by Outokumpu are permitted pursuant to
the terms of the TK Backup Facilities agreements.
The final maturity date of the Supplier Finance Backup Facility is the fifth
anniversary of the Completion Date and the final maturity date of the Revolving
Backup Facility is December 31, 2013. The borrowers under the TK Backup
Facilities are able to draw on the respective TK Backup Facility from the
Completion Date until three months prior to the respective final maturity date.
Subject to certain limitations, promptly after becoming aware of a termination
or reduction of a commitment that could be covered by the Supplier Finance
Backup Facility, Nirosta, VDM and Outokumpu must use best efforts to secure a
replacement or supplement for such terminated or reduced commitment. The TK
Backup Facilities agreements also contain certain customary representations,
covenants and events of default.
Outlook
In Outokumpu's interim report for the quarter ended September 30, 2012 it was
stated that the outlook included in such interim report (including the profit
forecast) applies only to Outokumpu and not to the Combined Group following the
completion of the Inoxum Transaction. Outokumpu expects to update its outlook
in connection with publishing its results for the quarter ending December 31,
2012. Due to the global economic uncertainty, the demand for stainless steel is
expected to remain relatively weak during the fourth quarter of 2012.
Pro Forma Financial Information
The following tables present unaudited pro forma financial information giving
effect to the Inoxum Transaction as if the Inoxum Transaction had been
completed on:
-- January 1, 2011 for the purposes of the unaudited pro forma statement of
income and unaudited pro forma statement of comprehensive income for the 12
months ended December 31, 2011, and that of the unaudited pro forma interim
statement of income and unaudited pro forma interim statement of
comprehensive income for the nine months ended September 30, 2012; and
-- September 30, 2012 for the purposes of the unaudited pro forma statement of
financial position.
The unaudited pro forma financial information below was prepared on a basis
consistent with IFRS as adopted by the EU, except for the Remedy Adjustments.
The underlying remedy assets, associated liabilities and related income and
expenses are carved out from the unaudited pro forma financial information
(i.e., they are deducted from the corresponding items of the Combined Group in
a separate column).
The unaudited pro forma financial information is based on the financial
information derived from the following sources:
-- The unaudited pro forma statement of financial position as at September 30,
2012 was based on and derived from (a) Outokumpu's unaudited consolidated
statement of financial position as at September 30, 2012; (b) Inoxum's
audited combined statement of financial position as at September 30, 2012;
and (c) the internal IFRS reporting of the Divestment Assets of Outokumpu
and Inoxum;
-- The unaudited pro forma statement of income and unaudited pro forma
statement of comprehensive income for the 12 months ended December 31, 2011
were based on and derived from (a) Outokumpu's audited consolidated
statement of income and audited consolidated statement of comprehensive
income for the year ended December 31, 2011; (b) Inoxum's audited combined
statement of income and audited combined statement of comprehensive income
for the fiscal year ended September 30, 2011 (excluding Inoxum's unaudited
combined interim statement of income and unaudited combined interim
statement of comprehensive income for the three months ended December 31,
2010 and including Inoxum's unaudited combined interim statement of income
and unaudited combined interim statement of comprehensive income for the
three months ended December 31, 2011); and (c) the internal IFRS reporting
of the Divestment Assets of Outokumpu and Inoxum; and
-- The unaudited pro forma interim statement of income and unaudited pro forma
interim statement of comprehensive income for the nine months ended
September 30, 2012 were based on and derived from (a) Outokumpu's unaudited
consolidated interim statement of income and unaudited consolidated interim
statement of comprehensive income for the nine months ended September 30,
2012; (b) Inoxum's audited combined statement of income and audited
combined statement of comprehensive income for the fiscal year ended
September 30, 2012 (excluding Inoxum's unaudited combined interim statement
of income and unaudited combined interim statement of comprehensive income
for the three months ended December 31, 2011); and (c) the internal IFRS
reporting of the Divestment Assets of Outokumpu and Inoxum.
The unaudited pro forma financial information below was prepared in a manner
consistent with the accounting principles applied in Outokumpu's audited
consolidated financial statements as at and for the year ended December 31,
2011, except for the accounting policies related to post-employment benefit
arrangements (pensions). Outokumpu applies the corridor method for the
recognition of actuarial gains and losses arising from pension arrangements
while Inoxum recognizes such gains and losses in other comprehensive income.
Inoxum classifies interest expenses related to pension plans as well as the
expected return on pension plan assets as financial expenses and financial
income, respectively. Outokumpu treats these interest expenses and the expected
return on plan assets as part of the employee benefit expenses. In preparation
of the pro forma financial information the future accounting policy of
Outokumpu has been applied which corresponds to Inoxum's current accounting
policy and has been explained in more detail in Note 3.
The unaudited pro forma adjustments also give effect to events that are
directly attributable to the Inoxum Transaction, and the proposed financing
thereof. The unaudited pro forma statement of financial position presents the
Inoxum Transaction as being accounted for under the acquisition method in
accordance with “IFRS 3 - Business Combinations.” Under the acquisition method,
assets and liabilities are recorded at their fair values on the date of
acquisition. The adjustments also include the Remedy Adjustments. The remedy
adjustments include the following from the Divestment Assets: Outokumpu's
stainless steel service center in Willich, Germany; Inoxum's AST S.p.A., Italy;
Inoxum's Terninox stainless steel service center, Italy; and Inoxum's
IT-service company Aspasiel S.r.l, Italy. Those assets that may be divested at
the option of the purchaser of the Divestment Assets have not been included in
the Impact of Remedy Adjustments, except for the warehouses in Padova, Ancona,
Florence and Bologna, Italy that are legally a part of Terninox. The unaudited
pro forma financial information below, including the provisional purchase price
allocation, are mainly based on the carrying values since the fair values of
the assets could not be determined reliably as at the date of this pro forma
financial information. Therefore, the provisional purchase price allocation is
hypothetical and the final purchase price allocation may significantly differ
from the provisional purchase price allocation presented in this unaudited pro
forma financial information.
The unaudited pro forma financial information below has been prepared for
illustrative purposes and, because of their nature, addresses a hypothetical
situation and therefore, do not represent Outokumpu's actual financial position
or results of operations. The unaudited pro forma financial information does
not purport to represent what Outokumpu's financial position and results would
have been if the Inoxum Transaction had been completed on the dates indicated
nor do they purport to represent Outokumpu's or the Combined Group's results of
operations for any future period or financial position at any future date. The
unaudited pro forma financial information does not reflect the effect of
estimated synergies and efficiencies associated with the Inoxum Transaction.
Outokumpu will recognize the identifiable assets acquired and the liabilities
assumed as of the Completion Date. The provisional amounts recognized at the
Completion Date, based on the provisional purchase price allocation including
the determination of fair values, may be adjusted within 12 months after the
Completion Date, to reflect new information obtained about facts and
circumstances that existed as at the Completion Date.
Unaudited Pro Forma Statement of Income
Outokum Inoxum, Differ Differ PPA Impact Impact Revers
Pro
pu, for for the ences ences adjust of of al of
forma
the 12 in in ments( Remedy Loan Inoxum
Combine
year months accoun presen 5) Adjust- Note(7 intra- d
Group
ended ended ting ments(6 ) group
Decembe Decembe polici tation ) financ
r 31, r 31, es(3) (4) ing
2011(1) 2011(2) with
Thysse
n-
Krupp(
8)
---------------------------------------------------------------------------
(audite (unaudi
d) ted)
(EUR in millions)
Sales 5,009 6,572 - (17) - (1,917) - -
9,647
Cost (4,882) (6,275) 2 10 (3) 1,947 - -
(9,201)
of
sales
Gross 127 297 2 (7) (3) 29 - -
446
margi
n
Other 47 23 - 83 353 (9) - -
497
opera
ting
incom
e
Sellin (147) (208) 4 (26) - 68 - -
(309)
g and
marke
ting
expen
ses
Admini (153) (163) 3 - 1 25 - -
(287)
strati
ve
expen
ses
Resear (21) - - (14) - 3 - -
(32)
ch and
devel
opment
expen
ses
Other (113) (337) - (61) (37) 27 - -
(521)
opera
ting
expen
ses
Operat (260) (388) 9 (25) 315 143 - -
(207)
ing
resul
t
Share (5) 1 - - - 0 - -
(4)
of
resul
ts in
assoc
iated
compa
nies
Financ
ial
incom
e and
expen
ses:
Intere 13 34 21 - - (13) - (21)
34
st
incom
e
Intere (77) (84) (21) - (3) 18 (53) 54
(166)
st
expen
ses
Market (120) - - - - - - -
(120)
price
gains
and
losse
s
Other 248 - - - - - - -
248
finan
cial
incom
e
Other (52) (23) - - - - (9) -
(84)
finan
cial
expen
ses
Total 12 (73) 0 - (3) 4 (62) 33
(89)
finan
cial
incom
e and
expen
ses
Profit (253) (460) 9 (25) 312 147 (62) 33
(299)
befor
e
taxes
Income 67 20 (2) 8 (30) 0 15 (10)
68
taxes
Net (186) (440) 7 (17) 282 147 (47) 23
(231)
resul
t for
the
perio
d
Unaudited Pro Forma Statement of Comprehensive Income
Outokumpu Inoxum, Differ Impact Other pro forma Pro
, for the for the ences of adjustments to forma
year 12 months in Remedy statement of Combin
ended ended accoun Adjust income and ed
December December ting ments( statement of Group 31, 31, polici 6) comprehensive
2011(1) 2011(2) es(3) income(4)(5)(7)(
8)
---------------------------------------------------------------
(audited) (unaudite
d)
(EUR in millions)
Net result for (186) (440) 7 147 241 (231)
the period
Other
comprehensive
income:
Exchange 12 (5) - - - 7
differences on
translating
foreign
operations
Available-for-sa
le financial
assets:
Fair value (23) - - - - (23)
changes during
the period
Reclassification (65) - - - - (65)
adjustments
from other
comprehensive
income to
profit or loss
Income tax 11 - - - - 11
relating to
available-for-s
ale financial
assets
Actuarial gains
/ (losses) from
pensions and
similar
obligations:
Change in - (1) (5) 2 - (4)
actuarial gains
/ (losses), net
Income tax - 1 2 (1) (1) 1
relating to
actuarial gains
/ (losses)
Cash flow
hedges:
Fair value (4) (14) - - - (18)
changes during
the period
Reclassification 1 3 - - - 4
adjustments
from other
comprehensive
income to
profit or loss
Income tax 1 7 - - (7) 1
relating to
cash flow
hedges
Share of other (2) - - - - (2)
comprehensive
income of
associated
companies
Other (68) (9) (3) 1 (8) (88)
comprehensive
income for the
period, net of
tax
Total (255) (449) 4 148 233 (319)
comprehensive
income for the
period
Unaudited Pro Forma Statement of Financial Position
Outoku Inoxum, Differ Differ PPA Impact Impact Reversa
Impact Pro
mpu, as at ences ences adjust of of l of
of forma
as at September in in ments(5 Remedy Loan Inoxum
Placem Combin
Septem 30, accoun presen ) Adjust Note(7 intra-g
ent(9) ed
ber 2012(2) ting ) roup
Group
30, polici tation ments( financi
2012(1 es(3) (4) 6) ng with
) Thyssen
Krupp(8
)
--------------------------------------------------------------------------------
----
(unaudite (audit
d) ed)
(EUR in millions)
Assets
Non-cu
rrent
asset
s:
Intang 531 68 - - (32) (4) - -
- 563
ible
asset
s
Proper 2,135 2,445 - - 62 (522) - -
- 4,120
ty,
plant
and
equip
ment
Invest - 12 - - 3 (15) - -
- 0
ment
prope
rty
Invest 40 18 - - - (8) - -
- 50
ments
in
assoc
iated
compa
nies
Availa 20 2 - - - - - -
- 22
ble-fo
r-sale
finan
cial
asset
s
Invest 2 - - - - - - -
- 2
ments
at
fair
value
throu
gh
profi
t or
loss
Deriva 6 - - - - (3) - -
- 3
tive
finan
cial
instr
uments
Trade 163 - - - - - - -
- 163
and
other
recei
vables
,
inter
est-be
aring
Loan 230 20 - - - (11) - -
- 238
recei
vables
and
other
inter
est-be
aring
asset
s
Trade 65 7 (56) - - - - -
- 16
and
other
recei
vables
,
non-i
nteres
t-bear
ing
Deferr 78 186 33 - (186) - - -
- 111
ed tax
asset
s
Total 3,039 2,737 (23) - (153) (552) - -
- 5,048
non-c
urrent
asset
s
Curren
-
t
asset
s:
Invent 1,103 1,677 - - - (404) - -
- 2,375
ories
Availa 6 - - - - - - -
- 6
ble-fo
r-sale
finan
cial
asset
s
Invest 88 - - - - - - -
- 88
ments
at
fair
value
throu
gh
profi
t or
loss
Deriva 32 52 - - - - - -
- 84
tive
finan
cial
instr
uments
Trade 8 - - - - - - -
- 8
and
other
recei
vables
,
inter
est-be
aring
Loans 1 158 - - - (12) - (91)
- 55
recei
vables
Loan 134 210 - - - (12) - (91)
- 242
recei
vables
and
other
inter
est-be
aring
asset
s
Trade 636 688 - - - (146) - -
- 1,177
and
other
recei
vables
,
non-i
nteres
t
beari
ng
Cash 1,178 67 - - (1,000) - - -
- 245
and
cash
equiv
alents
Total 3,051 2,641 - - (1,000) (562) - (91)
- 4,039
curre
nt
asset
s
Net - - - - - 594 - -
- 594
remed
y
asset
s
Total 6,090 5,378 (23) - (1,153) (520) - (91)
- 9,681
asset
s
Equity
and
liabi
lities
Equity
attri
butabl
e to
the
equit
y
holde
rs of
the
Compa
ny:
Share 311 - - - - - - -
- 311
capit
al
Premiu 714 - - - - - - -
- 714
m fund
Share 973 - - - - - - -
460 1,433
issue
Other 50 - - - - - - -
- 50
reser
ves
Retain 1,022 - (85) - - - - -
- 937
ed
earni
ngs
Result (226) - - - - - - -
- (226)
for
the
perio
d
Equity - 134 - - 219 0 - -
- 353
of
Inoxu
m
Equity 2,843 134 (85) - 219 0 -
460 3,572
attri
butabl
e to
the
equit
y
holde
rs of
the
Compa
ny
Non-co 17 13 - - - - - -
- 30
ntroll
ing
inter
ests
Total 2,860 147 (85) - 219 0 - -
460 3,601
equit
y
Non-cu
rrent
liabi
lities
:
Long-t 1,574 47 - - 62 (10) 876 -
- 2,549
erm
debt
Deriva 39 - - - - - -
- 39
tive
finan
cial
instr
uments
Deferr 8 90 (1) - 3 (1) - -
- 100
ed tax
liabi
lities
Define 63 338 63 - - (38) - -
- 426
d
benef
it and
other
long-
term
emplo
yee
benef
it
oblig
ations
Provis 18 135 - - - (5) - -
- 148
ions
Trade 6 1 - - - (1) - -
- 6
and
other
payab
les
Total 1,706 611 62 - 65 (54) 876 -
- 3,265
non-c
urrent
liabi
lities
Curren
t
liabi
lities
:
Curren 649 3,041 - - 1 (3) - (2,888)
- 799
t debt
Deriva 12 35 - - - - - -
- 47
tive
finan
cial
instr
uments
Trade 10 - - - 23 - - -
- 33
and
other
payab
les,
inter
est-be
aring
Provis 16 65 - (5) - (13) - -
- 64
ions
Income 0 6 - - - 33 - -
- 39
tax
liabi
lities
Trade 836 1,473 - 5 - (481) - -
- 1,832
and
other
payab
les,
non
inter
est-be
aring
Total 1,524 4,620 - 0 24 (464) - (2,888)
- 2,816
curre
nt
liabi
lities
.
Total 6,090 5,378 (23) 0 308 (519) 876 (2,888)
460 9,681
equit
y and
liabi
lities
__________
(1) This column reflects Outokumpu's audited consolidated statement of income
and audited consolidated statement of comprehensive income for the year ended
December 31, 2011 and Outokumpu's unaudited consolidated statement of financial
position as at September 30, 2012. Outokumpu's financial year is the calendar
year.
(2) This column reflects Inoxum's unaudited combined statement of income and
unaudited combined statement of comprehensive income for the 12 months ended
December 31, 2011. As Inoxum's fiscal year-end is September 30 and in order to
present unaudited pro forma financial information on comparable periods,
Inoxum's audited combined statement of income and audited combined statement of
comprehensive income for the fiscal year ended September 30, 2011 has been
adjusted by (i) adding the income and expenses from Inoxum's unaudited combined
interim statement of income and unaudited combined interim statement of
comprehensive income for the three months ended December 31, 2011; and (ii)
subtracting the income and expenses from Inoxum's unaudited combined interim
statement of income and unaudited combined interim statement of comprehensive
income for the three months ended December 31, 2010. Inoxum's unaudited
combined statement of income and unaudited combined statement of comprehensive
income for the 12 months ended December 31, 2011 were derived as follows:
Inoxum
-------------------------------------------------------------
For the For the three For the three For the 12
fiscal year months ended months ended months ended
ended December 31, December 31, December 31,
September 30, 2010 (-) 2011 (+) 2011
2011
------------------------------------------------------------- (audited) (unaudited)
(EUR in millions)
Net sales 6,739 1,605 1,438 6,572
Cost of sales (6,363) (1,517) (1,429) (6,275)
Gross profit 376 88 9 297
Other operating 22 3 4 23
income
Selling expenses (206) (48) (50) (208)
General and (155) (39) (47) (163)
administrative
expenses
Other operating (325) (7) (19) (337)
expenses
Income / (loss) (288) (3) (103) (388)
from operations
Income from 3 2 - 1
companies
accounted for
using the equity
method
Interest income 27 2 9 34
Interest expense (59) (13) (38) (84)
Other financial (25) (6) (4) (23)
expense, net
Financial expense, (54) (15) (33) (72)
net
Loss before taxes (342) (18) (136) (460)
Income tax benefit 2 5 23 20
Net loss (340) (13) (113) (440)
Other
comprehensive
income:
Foreign currency
translation
adjustment:
Change in (1) 13 9 (5)
unrealized
gains/(losses),
net
Actuarial
gains/(losses)
from pensions and
similar
obligations:
Change in 28 21 (8) (1)
actuarial
gains/(losses),
net
Tax effect (9) (7) 3 1
Unrealized
(losses)/gains on
derivative
financial
instruments:
Change in (27) (1) 12 (14)
unrealized
gains/(losses),
net
Net realized 5 2 - 3
(gains)/losses
Tax effect 7 - - 7
Other 3 28 16 (9)
comprehensive
income
Total (337) 15 (97) (449)
comprehensive
income
An impairment loss on goodwill, amounting to EUR 290 million, was recognized
within other operating expenses in Inoxum's audited combined statement of
income for the fiscal year ended September 30, 2011.
(3) This column reflects the impact of accounting policy alignment of
historical financial information between Outokumpu and Inoxum. In this column
adjustments are made to arrive at comparable figures.
Adjustments to the Unaudited Pro Forma Statement of Financial Position as at
September 30, 2012
Outokumpu applies the corridor method for recognizing actuarial gains and
losses arising from pension benefit arrangements, while Inoxum recognizes such
actuarial gains and losses in other comprehensive income. In the preparation of
the unaudited pro forma financial information, Inoxum's accounting policy has
been applied to follow the “IAS 19 - Employee Benefits” principles which will
become effective on January 1, 2013, to reflect the impact of this future
requirement. This amendment decreased Outokumpu's other receivables by EUR 56
million, increased pension obligations by EUR 63 million and had an aggregate
impact on retained earnings of negative EUR 119 million. The related impact on
deferred taxes being taken into account, the decrease in deferred tax
liabilities was EUR 1 million and the increase in deferred tax assets was EUR
33 million. Consequently, the net effect on equity was negative EUR 85 million.
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
The recognition of actuarial gains and losses in other comprehensive income
instead of the application of the corridor method had a positive effect of EUR
9 million on the unaudited pro forma statement of income for the 12 months
ended December 31, 2011. The impact of the amendment was EUR 2 million on cost
of sales, EUR 4 million on selling and marketing expenses and EUR 3 million on
administrative expenses. The related income tax effect was EUR 2 million. The
positive effect resulted mainly from certain curtailments. When actuarial gains
and losses are recognized in other comprehensive income, such gains and losses
are not reclassified to profit or loss in subsequent periods. The impact of the
reversal of the actuarial losses recognized as part of the curtailments carried
out in the 12 months ended December 31, 2011 amounted to EUR 8 million.
Interest expenses of EUR 21 million and expected return on plan assets of EUR
21 million were transferred from operating functions to interest expenses and
interest income, respectively, in accordance with the adopted principle of
presenting the interest expense and expected return on plan assets within the
financial items.
The actuarial losses recognized in other comprehensive income amounted to EUR 5
million and the related tax effect was EUR 2 million.
(4) This column reflects the differences in presentation of financial statement
items, thus adjustments are made to present Inoxum's figures in a manner
consistent with Outokumpu's figures. This column also reflects the transfer of
the re-charge for the utilization of ThyssenKrupp trade name from equity to the
statement of income of Inoxum.
Adjustment to the Unaudited Pro Forma Statement of Financial Position as at
September 30, 2012
Reclassifications of line items include the following items:
-- Certain employee benefit obligations: These obligations, amounting to EUR 5
million, were recognized in other provisions in Inoxum's statement of
financial position as at September 30, 2012. These obligations were
reclassified to other payables in accordance with Outokumpu's accounting
policy.
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
Reclassifications of line items include the following major items:
-- Inoxum recognizes the impact of fair value changes arising from derivatives
not under hedge accounting in sales and cost of sales to which they relate,
whereas Outokumpu treats them as adjustments to other operating income and
other operating expenses. The reclassification of the fair value changes
arising from derivatives not under hedge accounting had an impact of
negative EUR 17 million on sales, EUR 10 million on cost of sales, EUR 83
million on other operating income and negative EUR 75 million on other
operating expenses;
-- The re-charge for the utilization of the ThyssenKrupp trade name was
accounted for by Inoxum as an equity transaction with ThyssenKrupp. In the
unaudited pro forma statement of income the re-charge for the right to use
the ThyssenKrupp trade name is presented according to Outokumpu's
accounting policy (i.e., it is expensed). The resulting effect on the
unaudited pro forma statement of income on selling and marketing expenses
was negative EUR 26 million. The related income tax effect was EUR 8
million; and
-- Inoxum recognizes research and development expenses in other operating
expenses, whereas Outokumpu presents such expenses as a separate line item
in the statement of income. These expenses, amounting to EUR 14 million,
were reclassified from other operating expenses to research and development
expenses.
(5) This column reflects the effects of the Inoxum Transaction and the
provisional purchase price allocation on the unaudited pro forma statement of
financial position as at September 30, 2012. The final purchase price
allocation could significantly differ from the provisional purchase price
allocation below, which is principally based on the carrying values and is
presented for illustrative purposes only.
Consideration to Be Transferred for Inoxum and Liabilities to Be Assumed
The total consideration payable by Outokumpu to ThyssenKrupp as part of the
Inoxum Transaction and the liabilities to be assumed by Outokumpu comprised the
following items as at September 30, 2012:
As at September 30, 2012
-------------------------
(EUR in millions)
Consideration to be transferred:
Consideration in cash 1,000
Placement Shares to ThyssenKrupp 460(1)
Loan Note to be issued to ThyssenKrupp 876(2)
Liabilities to be assumed:
Inoxum's pension obligations 338
Inoxum's net external financial debt 133
Total consideration and liabilities to be assumed 2,807
_____________
(1) Based on Outokumpu share price of EUR 0.74 as at November 9, 2012.
(2) The principal amount of the Loan Note is subject to adjustment. For more
information on the Loan Note, see Note 7.
The total consideration payable by Outokumpu to ThyssenKrupp as part of the
Inoxum Transaction and the liabilities to be assumed by Outokumpu amount to, in
aggregate, EUR 2,807 million consisting of (i) EUR 1 billion in cash; (ii) the
Placement Shares, with a value of EUR 460 million, to be issued to ThyssenKrupp
(based on the reported closing price of Outokumpu's shares on the Helsinki
Stock Exchange on November 9, 2012); (iii) the Loan Note, with a principal
amount of EUR 876 million based on Inoxum's audited combined statement of
financial position as at September 30, 2012; and (iv) Outokumpu assuming
Inoxum's pension obligations of EUR 338 million and net external financial debt
of EUR 133 million (based on Inoxum's audited combined statement of financial
position as at September 30, 2012), defined as total liabilities to financial
institutions plus total finance lease liabilities less cash and cash
equivalents. The EUR 1 billion cash consideration and the Loan Note are the
consideration for ThyssenKrupp's outstanding receivables against Inoxum. For
more information on the Loan Note, see Note 7.
The parties have agreed that the disposal of the Divestment Assets will result
in an adjustment to the consideration payable by Outokumpu to ThyssenKrupp for
Inoxum (through a reduction of the principal amount of the Loan Note) to
account for the financial impact of the divestment (the difference between the
fair market value and the sale price and the amount of lost synergies). The
adjustment will be calculated in accordance with the terms of the Business
Combination Agreement and cannot exceed EUR 200 million. For more information,
see “Material Agreements—Inoxum Transaction—Business Combination
Agreement―Regulatory Approvals.” As the financial impacts of the disposal of
the Divestment Assets are not yet known, the adjustment to the principal amount
of the Loan Note and the resulting effects have not been considered in
determination of the total amount of consideration, nor in the preparation of
the unaudited pro forma financial information.
Following the completion of the Inoxum Transaction, ThyssenKrupp will hold 29.9
percent of Outokumpu's issued and outstanding Shares. The value of the
Placement Shares for the purposes of the provisional purchase price allocation,
EUR 460 million, has been calculated based on Outokumpu's share price as at
November 9, 2012 (EUR 0.74 per share).
Outokumpu's share price as well as adjustments to the principal amount of the
Loan Note will affect the final amount of the consideration. See Note 7 for
additional information on the effect of the adjustments to the Loan Note and
Note 9 for additional information on the effect of Outokumpu's share price on
the final amount of the consideration. Thus, changes in the final amount of the
consideration will affect the final purchase price allocation and the resulting
negative goodwill in the pro forma financial information. The Inoxum
Transaction is estimated to result in a gain from a bargain purchase (i.e.,
negative goodwill), based on the information available for the preparation of
this unaudited pro forma financial information and the measurement principles
applied. Changes in the final amount of the consideration would impact other
operating income in the unaudited pro forma financial information. As the
provisional purchase price allocation is hypothetical, the final result of the
Inoxum Transaction may significantly differ from the provisional purchase price
allocation.
Provisional Purchase Price Allocation
The provisional purchase price allocation as at September 30, 2012 is
hypothetical as control over Inoxum had not transferred from ThyssenKrupp to
Outokumpu and the preparation of the purchase price allocation has only been
started. The final purchase price allocation will be prepared based on the fair
values of Inoxum's identifiable assets, liabilities and contingent liabilities
as at the Completion Date. Therefore, the final amount of the consideration as
well as the final purchase price allocation as at the Completion Date may
significantly differ from the provisional purchase price allocation presented
in this unaudited pro forma financial information. In the provisional purchase
price allocation the Remedy Adjustments were prepared based on the carrying
values of the Divestment Assets and associated liabilities. The consideration
to be received for the Divestment Assets has not been considered as the
consideration or the fair values of the Divestment Assets are not known as at
the date of these listing particulars.
The provisional purchase price allocation has been prepared based on high-level
assessment of potential intangible assets based on September 30, 2012 financial
information and material available at the time of preparation of the unaudited
pro forma financial information. Based on the high-level analysis,
customer-based, marketing-related and contract-based intangible assets were
identified. The fair value of these intangible assets identified was estimated
to amount to EUR 13 million. The remaining high level useful life of the
intangible assets recognized was estimated to be two years.
In this provisional purchase price allocation the Inoxum Transaction is
estimated to result in a gain from a bargain purchase (i.e., negative
goodwill). This gain is presented under other operating income in the unaudited
pro forma financial information. Outokumpu's share price as well as adjustments
to the principal amount of the Loan Note will impact the final amount of the
consideration and the final purchase price allocation will be prepared based on
the fair values of Inoxum's identifiable assets, liabilities and contingent
liabilities as at the Completion Date, when Outokumpu gained control over
Inoxum. Therefore, the resulting negative goodwill is provisional and the
consideration as well as the resulting residuals at the Completion Date may
significantly differ from that presented in this unaudited pro forma financial
information.
The consideration payable by Outokumpu to ThyssenKrupp as part of the Inoxum
Transaction comprised the following items as at September 30, 2012, according
to “IFRS 3 - Business Combinations”:
As at
September 30, 2012
-------------------
(EUR in millions)
Consideration in cash 1,000
Placement Shares to be issued to ThyssenKrupp 460(1)
Loan Note to be issued to ThyssenKrupp 876(2)
Total consideration to be transferred 2,336
_____________
(1) Based on Outokumpu share price of EUR 0.74 as at
November 9, 2012.
(2) The principal amount of the Loan Note is subject to
adjustment. For more information on the Loan Note, see Note 7.
Indicative Fair Values of Inoxum's Identifiable Assets and Liabilities Assumed
The following table sets forth Inoxum's identifiable assets and liabilities to
be assumed as at September 30, 2012 based on the provisional purchase price
allocation. The values are principally based on book values because as at the
date of these listing particulars the fair values could not be determined
reliably.
As at
September 30, 2012
-------------------
(EUR in millions)
Intangible assets 36
Property, plant and equipment 2,506
Investment property 15
Investments in associated companies 18
Available-for-sale financial assets 2
Other non-current receivables 7
Deferred tax assets 0
Derivative financial instruments 52
Inventory 1,677
Loans receivables 66
Trade and other receivables 688
Cash and cash equivalents 67
Non-controlling interest (13)
Long-term debt (110)
Deferred tax liabilities (93)
Pension obligations (338)
Provisions (non-current) (135)
Current debt (153)
Derivative financial instruments (35)
Trade and other payables (interest-bearing) (24)
Provisions (current) (61)
Income tax liabilities (6)
Trade payables (non-interest-bearing) (1,477)
Identifiable net assets 2,689
Gain from bargain purchase (negative goodwill) (353)
Total 2,336
Adjustments to the Unaudited Pro Forma Statement of Financial Position as at
September 30, 2012
The major adjustments include the following:
-- Intangible assets: The goodwill included in Inoxum's audited combined
statement of financial position as at September 30, 2012, amounting to EUR
47 million, has been derecognized in the unaudited pro forma statement of
financial position. In the provisional purchase price allocation, a
write-down of EUR 13 million on intangible assets has been recognized.
Additionally, customer-based, marketing-related and contract-based
intangible assets have been identified. The fair value of these intangible
assets identified was estimated to total EUR 13 million and their useful
lives were estimated to be two years. Furthermore, a right of use agreement
that is to be assumed by Outokumpu as part of the Inoxum Transaction has
been capitalized as an intangible asset, amounting to EUR 14 million. The
corresponding liability is presented under trade and other payables. The
aggregate net impact of these adjustments discussed above on intangible
assets amounted to negative EUR 32 million.
-- Property, plant and equipment: In the provisional purchase price allocation
a write-down of EUR 10 million on property, plant and equipment has been
recognized. This relates to the Italian operations of Inoxum. Sufficient
information to carry out a thorough valuation on property, plant and
equipment was not available for the preparation of the provisional purchase
price allocation. Thus, the fair value adjustment to property, plant and
equipment in the final purchase price allocation may significantly differ
from the provisional purchase price allocation presented in this unaudited
pro forma financial information. In respect of property, plant and
equipment some assets are also to be assumed by Outokumpu as part of the
Inoxum Transaction, mainly consisting of real estate assets, amounting to
EUR 9 million. The corresponding liability is presented under trade and
other payables. In the Inoxum Transaction certain other assets are to be
assumed by Outokumpu, mostly consisting of land areas and buildings, which
are accounted for as assets acquired under finance leases assuming
Outokumpu will exercise its option to enter into these lease contracts. The
resulting increase in property, plant and equipment amounted to EUR 63
million. The aggregate net increase of property, plant and equipment amounted to EUR 62 million.
-- Deferred tax assets and deferred tax liabilities: Deferred tax assets of
Inoxum, totaling EUR 186 million, were written down in the provisional
purchase price allocation due to the review and evaluation of the tax and
financing strategies after the combination of Outokumpu and Inoxum. The
amount of the deferred tax assets will be evaluated after the completion of
the Inoxum Transaction based on the estimates of the taxable income in the
foreseeable future and on the intra-group financing strategies of the
Combined Group. The accounting treatment of deferred tax assets could
significantly change when the final purchase price allocation is prepared.
A deferred tax liability amounting to EUR 3 million (net) was recorded on
the difference between the fair values and the tax bases of the acquired
assets as well as liabilities and contingent liabilities assumed.
-- Cash and cash equivalents: This adjustment reflects the EUR 1 billion that
was raised in the Rights Offering to partly finance the Inoxum Transaction.
-- Interest-bearing liabilities: Of the finance lease liabilities related to
the assets to be assumed by Outokumpu as part of the Inoxum Transaction
(property, plant and equipment), EUR 62 million is non-current and EUR 1
million current.
-- Items related to Inoxum's intra-group financing with ThyssenKrupp: The
major adjustment items related to ThyssenKrupp are associated with Inoxum's
intra-group financing with ThyssenKrupp. The adjustments are made to align
the remaining amount of liabilities with the amount agreed upon to be
assumed by Outokumpu as part of the Inoxum Transaction, see Note 8.
Based on the latest information available, Outokumpu is not aware of
Inoxum-related environmental obligations that would not have been provided for
appropriately. See “Risk Factors—Risks Relating to the Combined Group and the
Stainless Steel Industry—The Combined Group's operations are subject to various
environmental laws and regulations and a failure to comply with these laws and
regulations could result in unexpected costs and other liabilities.” Regarding
closure costs no reliable estimation of such expenditure can currently be made.
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
The major adjustments are as follows:
-- Other operating income: The Inoxum Transaction is estimated to result in a
gain from a bargain purchase (i.e., negative goodwill), amounting to EUR
353 million. Currently this gain is presented under other operating income.
-- Acquisition-related costs: The estimated acquisition-related costs amount
to EUR 21 million and are presented under other operating expenses. Other
operating expenses also include other expenditure arising from the Inoxum
Transaction totaling EUR 16 million. In aggregate these costs amount to EUR
37 million.
-- Depreciation and amortization: The impact on depreciation and amortization
arising from (i) the fair value adjustments to the carrying amounts of
intangible assets and property, plant and equipment; (ii) the assets to be
assumed by Outokumpu as part of the Inoxum Transaction relating to
property, plant and equipment; and (iii) the write-downs on intangible
assets and property, plant and equipment, amounted in aggregate to negative
EUR 2 million (net). The largest sub-item, negative EUR 7 million, arises
from the amortization of the intangible assets identified in the Inoxum
Transaction. The impact of these adjustments amounted to negative EUR 3
million on cost of sales and EUR 1 million on administrative expenses.
-- Interest expenses: Interest expenses related to the finance lease
liabilities arising from assets to be assumed by Outokumpu as part of the
Inoxum Transaction amounted to EUR 3 million.
-- Deferred taxes: The change in deferred taxes was negative EUR 30 million,which reversed the increase of deferred tax assets recognized in the
unaudited pro forma statement of income for the 12 months ended December
31, 2011. The corresponding effect on other comprehensive income amounted
to negative EUR 8 million.
(6) This column reflects the impacts of the Remedy Adjustments. The European
Commission approved the proposed combination of Outokumpu and Inoxum provided
that Outokumpu will divest the Divestment Assets.
The underlying assets, associated liabilities as well as related income and
expenses are carved out in the pro forma information (i.e., they are deducted
from the respective income, expenses, assets and liabilities of the Combined
Group in a separate column). The purpose of this presentation is to illustrate
the Combined Group as it will be without the Divestment Assets. In the
unaudited pro forma financial information, as regard to the carve-out, the
consideration from the sale of the Divestment Assets has not been considered
since on the date of these listing particulars, the sale process of the
Divestment Assets has only begun as the European Commission only approved the
proposed combination of Outokumpu and Inoxum on November 7, 2012. Consequently,
the net amount consisting of the Divestment Assets and associated liabilities
added with financial receivables is presented as a separate line item in the
unaudited pro forma statement of financial position.
Outokumpu believes that the chosen presentation of financial receivables,
whereby these items are shown as part of the net remedy assets (in the column
“Impact of Remedy Adjustments”) best illustrates the post-Inoxum Transaction
position when Outokumpu will no longer finance the owner entities of the
Divestment Assets, based on the decision of the European competition authority
(European Commission). Thus, subsequent to the Inoxum Transaction, the Combined
Group will not have financial receivables from the owner entities of the
Divestment Assets. The financial receivables of the Combined Group from the
owner entities of the Divestment Assets are presented in the column “Impact of
Remedy Adjustments” as part of the net remedy assets.
Adjustments to the Unaudited Pro Forma Statement of Financial Position as at
September 30, 2012
The major adjustments include the following (based on the carrying values of
the underlying assets and associated liabilities):
-- Property, plant and equipment: As a result of the Remedy Adjustments the
balance of property, plant and equipment in the unaudited pro forma
statement of financial position was reduced by EUR 522 million.
-- Inventories: The impact of the Remedy Adjustments amounted to negative EUR
404 million.
-- Trade and other receivables (non interest-bearing): The impact of the
Remedy Adjustments amounted to negative EUR 146 million.
-- Trade and other payables (current): The impact of the Remedy Adjustments
amounted to negative EUR 481 million.
-- Net remedy assets: The impact of the Remedy Adjustments amounted, in
aggregate, to EUR 594 million.
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
The major adjustments are as follows:
-- Sales: The impact of the Remedy Adjustments amounted to negative EUR 1,917
million.
-- Cost of sales: The impact of the Remedy Adjustments amounted to EUR 1,947
million.
To reflect the impact of the Remedy Adjustments from the perspective of the
Combined Group the internal sales between Inoxum and the owner entities of the
Divestment Assets (sales of the Combined Group to the related companies) have
been reclassified to external sales. Previously these sales of the Combined
Group to the owner entities of the Divestment Assets were eliminated in the
combined financial statements of Inoxum. The impact of this adjustment amounted
to EUR 41 million. The respective adjustment was made to cost of sales.
(7) This column reflects the impact of the Loan Note, which is part of the
consideration.
ThyssenKrupp Nederland B.V. and Outokumpu have entered into the Loan Note
agreement on the Completion Date. The Loan Note is part of the consideration
for the Inoxum Transaction and is contractually subordinated to certain
specified current and future debt of Outokumpu in the event of an insolvency of
Outokumpu. The principal amount of the Loan Note has been calculated based on
an estimate of Inoxum's Intra-Group Financing Balance (as defined herein)
prepared by ThyssenKrupp in accordance with the Business Combination Agreement
and consists of two tranches. The initial principal amount of the Tranche A is
approximately EUR 700 million, which will be adjusted following the Completion
Date as described below, and the initial principal amount of the Tranche B is
EUR 550 million. The pro forma financial information has been prepared as at
September 30, 2012 when, based on Inoxum's audited combined statement of
financial position, the principal amount of the Loan Note was EUR 876 million.
Tranche A will be adjusted to reflect the difference between (i) Inoxum's
estimated Intra-Group Financing Balance prior to the Closing Date and (ii)
Inoxum's final Intra-Group Financing Balance (“Inoxum's Final Intra-Group
Financing Balance”), both prepared by ThyssenKrupp. Further, the principal
amount of Tranche B will be adjusted to account for the financial impact of the
disposal of the Divestment Assets (the difference between the fair market value
and the sale price and the amount of lost synergies). The adjustment will be
calculated in accordance with the terms of the Business Combination Agreement
and cannot exceed EUR 200 million. For more information of these adjustments,
see “Material Agreements—Inoxum Transaction—Business Combination
Agreement―Regulatory Approvals” below.
Repayments of Tranche A will begin on the fourth anniversary of the Completion
Date in accordance with an agreed repayment schedule. The Loan Note will
finally mature on November 30, 2021 (i.e., on the ninth anniversary of the
Completion Date). Interest accrues on the principal amount of the Loan Note at
a rate of three-month Euribor plus a margin (between 4.0 percent per annum and
9.5 percent per annum) that increases at specific times. Interest is payable
every three months. Regarding Tranche A, Outokumpu has the option to capitalize
up to 100 percent of the interest during the first 24 months and up to 50
percent for months 25 through 36. After month 36, Outokumpu will not have the
option to capitalize interest on Tranche A. Regarding Tranche B, Outokumpu has
the option to capitalize up to 100 percent of the interest during the first 60
months, but if Outokumpu capitalizes more than 50 percent of the interest for
interest periods ending during months 25 through 36 or any interest for
interest periods ending during months 37 through 60, it would have to pay a
higher margin. After month 60, Outokumpu will not have the option to capitalize
interest on Tranche B.
For more information on the conditions related to the Loan Note see “Material
Agreements—Inoxum Transaction—Loan Note.”
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
The interest expense adjustment, negative EUR 53 million, was determined based
on the estimated principal amount of the Loan Note as at September 30, 2012.
ThyssenKrupp Nederland Holding B.V., as lender, and Outokumpu, as borrower,
have entered into the EUR 250 million Revolving Backup Facility (as defined
herein) agreement, dated the Completion Date. The adjustment arisen from the
fees related to the Revolving Backup Facility agreement made to the other
financial expenses amounted to negative EUR 5 million. For more information on
the Revolving Backup Facility, see “Material Agreements—Inoxum Transaction—TK
Backup Facilities.”
In December 2012, Outokumpu entered into a EUR 250 million forward start
revolving credit facility (the “FSF”) with Nordea. The adjustment arisen from
the fees related to the FSF made to the other financial expenses amounted to
negative EUR 4 million. For more information on the FSF, see “Operating and
Financial Review and Prospects—Borrowings—Revolving Credit Facilities.”
The aggregate tax impact associated with the adjustments related to the Loan
Note, the Revolving Backup Facility agreement and the FSF amounted to EUR 15
million.
(8) This column reflects the reversal of Inoxum's intra-group financing with
ThyssenKrupp as these financial assets and financial liabilities (net) will not
be assumed by Outokumpu as part of the Inoxum Transaction.
Adjustments to the Unaudited Pro Forma Statement of Financial Position as at
September 30, 2012
In the unaudited pro forma statement of financial position as at September 30,
2012, EUR 91 million of non-current financial assets (receivables) from
ThyssenKrupp were deducted from assets. Inoxum's current financial debt of EUR
3,041 million consists of both intra-group financing of EUR 2,888 million from
ThyssenKrupp, which was deducted from the financial debt, and financial debt
from financial institutions and finance lease liabilities, totaling EUR 153
million. Inoxum's non-current financial debt of EUR 47 million consisted of
financial debt from financial institutions and finance lease liabilities.
Consequently, subsequent to the completion of the Inoxum Transaction, Inoxum
will continue having only those liabilities that have been specifically agreed
upon as part of the Inoxum Transaction.
Adjustments to the Unaudited Pro Forma Statement of Income for the 12 Months
Ended December 31, 2011
An adjustment amounting to EUR 33 million (net) was made to financial items.
This relates to Inoxum's intra-group financing with ThyssenKrupp, both to
liabilities and receivables. The adjustments to both intra-group interest
income, negative EUR 21 million, and intra-group interest expenses, EUR 54
million, were based on the assumption that in the Inoxum Transaction these
receivables and liabilities will be settled. The related tax effect was
negative EUR 10 million.
(9) This column reflects the Placement to ThyssenKrupp, representing in
aggregate, 29.9 percent of its issued and outstanding Shares, calculated based
on Outokumpu's share price of EUR 0.74 per share as at November 9, 2012,
totaling EUR 460 million. The value of the Placement Shares is dependent on
Outokumpu's share price on the Completion Date, thus it is subject to change.
The following table sets forth the value of the Placement Shares as at November
9, 2012:
As at November 9,
2012
---------------------
Number of Outokumpu shares 1,456,022,888
Share price (EUR per share) 0.74
Pre-Placement market capitalization (EUR in millions) 1,077
Outokumpu's shareholders' share in the Combined Group 70.1
(percent):
ThyssenKrupp's share in the Combined Group (percent) 29.9
Post-Placement market capitalization (EUR in millions)(1) 1,537
Pre-Placement market capitalization (EUR in millions) 1,077
Placement Shares (EUR in millions) 460
_____________
(1) Post-Placement market capitalization was calculated by dividing the
current market capitalization plus the number of shares issued in the Rights
Offering with rights issue by the percentage ownership of 70.1 percent of
current Outokumpu shares.
If the share price were EUR 0.70 per share or EUR 1.30 per share, the Placement
Shares would amount to EUR 435 million or EUR 807 million, respectively, and
the gain (negative goodwill) arising from the Inoxum Transaction would be EUR
378 million or goodwill EUR 6 million, respectively.
(10) Pro forma EBITDA of the Combined Group
Outoku Inoxum Differ Differ PPA Impact Impact Reversal Pro
mpu, for ences ences adjust of of of forma
for the 12 in in - Remedy Loan Inoxum Combin
the months accoun presen ments( Adjust Note(7 intra-gr ed
year ended ting - 5) - ) oup Group
ended Decemb polici tation ments( financin
Decemb er es(3) (4) 6) g with
er 31, Thyssen-
31, 2011(2 Krupp(8)
2011(1 )
)
-------------------------------------------------------------------------
(audit (unaud
ed) ited)
(EUR in millions)
Operat (260) (388) 9 (25) 315 143 - - (207)
ing
resul
t
Deprec 234 181 - - 2 (94) - - 232
iation
and
amort
izatio
n
Impair 106 290 - - - (34) - - 236
ments
EBITDA 80 83 9 (25) 317 15 - - 478
(*)
_____________
(*) EBITDA = Operating result before depreciation,
amortization and impairments.
Unaudited Pro Forma Interim Statement of Income
Outokum Inoxum, Differ Differ PPA Impact Impact Revers
Pro
pu, for for the ences ences adjust of of al of
forma
the nine in in ments( Remedy Loan Inoxum
Combine
nine months accoun presen 5) Adjust- Note(7 intra- d
Group
months ended ting - ments(6 ) group
ended Septemb polici tation ) financ
Septemb er es(3) (4) ing
er 30, with
30, 2012(2) Thysse
2012(1) n-
Krupp(
8)
---------------------------------------------------------------------------
(unaudited)
(EUR in millions)
Sales 3,533 4,909 - 10 - (1,072) - -
7,379
Cost (3,474) (4,862) - (2) 1 1,088 - -
(7,250)
of
sales
Gross 59 46 - 8 1 16 - -
129
margi
n
Other 21 29 - 24 - (17) - -
57
opera
ting
incom
e
Sellin (89) (174) 1 - - 38 - -
(224)
g and
marke
ting
expen
ses
Admini (115) (139) - - 1 16 - -
(237)
strati
ve
expen
ses
Resear (14) - - (18) - 3 - -
(30)
ch and
devel
opment
expen
ses
Other (30) (48) 1 (13) - 29 - -
(61)
opera
ting
expen
ses
Operat (167) (286) 2 0 2 85 - -
(365)
ing
resul
t
Share (0) 3 - - - 1 - -
3
of
resul
ts in
assoc
iated
compa
nies
Financ
ial
incom
e and
expen
ses:
Intere 9 17 14 - - (6) - (11)
24
st
incom
e
Intere (57) (75) (16) - (3) 6 (40) 59
(125)
st
expen
ses
Market (35) - - - - - - -
(35)
price
gains
and
losse
s
Other 1 - - - - - - -
1
finan
cial
incom
e
Other (7) (22) - - - 9 (4) -
(24)
finan
cial
expen
ses
Total (88) (76) (2) - (3) 9 (44) 48
(156)
finan
cial
incom
e and
expen
ses
Result (255) (363) 0 0 (1) 95 (44) 48
(519)
befor
e
taxes
Income 29 45 - - (26) 0 11 (14)
44
taxes
Net (226) (318) 0 0 (27) 95 (33) 34
(475)
resul
t for
the
perio
d
Unaudited Pro Forma Interim Statement of Comprehensive Income
Outokumpu Inoxum, Differ Impact Other pro forma Pro
, for the for the ences of adjustments to forma
nine nine in Remedy statement of Combin
months months accoun Adjust income and ed
ended ended ting ments( statement of Group
September September polici 6) comprehensive
30, 30, es(3) income(4)(5)(7)(
2012(1) 2012(2) 8)
----------------------------------------------------------------
(unaudited)
(EUR in millions)
Net result for (226) (318) 0 95 (26) (475)
the period
Other
comprehensive
income:
Exchange 4 5 - - - 9
differences on
translating
foreign
operations
Available-for-s
ale financial
assets:
Fair value (2) - - - - (2)
changes during
the period
Reclassificatio - - - - - -
n adjustments
from other
comprehensive
income to
profit or loss
Income tax 1 - - - - 1
relating to
available-for-
sale financial
assets
Actuarial gains
/ (losses)
from pensions
and similar
obligations:
Change in - (50) (68) 5 - (113)
actuarial
gains /
(losses), net
Income tax - 15 19 (1) (15) 18
relating to
actuarial
gains /
(losses)
Cash flow
hedges:
Fair value 19 10 - - - 29
changes during
the period
Reclassificatio (2) (3) - - - (5)
n adjustments
from other
comprehensive
income to
profit or loss
Income tax 9 (6) - - 3
relating to
cash flow
hedges
Share of other - - - - - -
comprehensive
income of
associated
companies
Other 29 (28) (49) 4 (15) (60)
comprehensive
income for the
period, net of
tax
Total (198) (346) (49) 99 (41) (535)
comprehensive
income for the
period
____________
(1) This column reflects Outokumpu's unaudited consolidated interim statement
of income and unaudited consolidated interim statement of comprehensive income
for the nine months ended September 30, 2012.
(2) This column reflects Inoxum's unaudited combined interim statement of
income and unaudited combined interim statement of comprehensive income for the
nine months ended September 30, 2012. As Inoxum's fiscal year-end is September
30 and in order to present unaudited pro forma financial information on
comparable periods, Inoxum's audited combined statement of income and audited
combined statement of comprehensive income for the fiscal year ended September
30, 2012 were adjusted by subtracting the income and expenses from Inoxum's
unaudited combined interim statement of income and unaudited combined interim
statement of comprehensive income for the three months ended December 31, 2011.
Inoxum's unaudited combined interim statement of income and unaudited combined
interim statement of comprehensive income for the nine months ended September
30, 2012 were derived as follows:
Inoxum
-----------------------------------------------
For the fiscal For For the nine
year ended the months ended
September 30, 2012 three September 30, 2012
months ended
Decemb
er 31,
2011
(-)
-----------------------------------------------
(audited) (unaudited)
(EUR in millions)
Net sales 6,346 1,438 4,909
Cost of sales (6,291) (1,429 (4,862)
)
Gross profit 55 9 46
Selling expenses (224) (50) (174)
General and administrative (186) (47) (139)
expenses
Other operating income 33 4 29
Other operating expenses (67) (19) (48)
Income / (loss) from operations (389) (103) (286)
Income from companies accounted 3 0 3
for using the equity method
Interest income 26 9 17
Interest expense (113) (38) (75)
Other financial expense, net (26) (4) (22)
Financial expense, net (109) (33) (76)
Income / (loss) before income (498) (136) (363)
taxes
Income tax benefit / (expense) 68 23 45
Net income / (loss) (431) (113) (318)
Other comprehensive income:
Foreign currency translation
adjustment:
Change in unrealized gains / 14 9 5
(losses), net
Actuarial gains / (losses) from
pensions and similar
obligations:
Change in actuarial gains / (58) (8) (50)
(losses), net
Tax effect 17 3 15
Unrealized (losses) / gains on
derivative financial
instruments (hedging reserve):
Change in unrealized gains / 22 12 10
(losses), net
Net realized (gains) / losses (3) 0 (3)
Tax effect (6) 0 (6)
Other comprehensive income (13) 15 (28)
Total comprehensive income (444) (98) (346)
Inoxum's unaudited combined interim statement of income for the nine months
ended September, 30, 2012 includes an impairment charge on property, plant and
equipment recognized in cost of sales, amounting to EUR 47 million primarily
related to the Krefeld melt shop to be closed by the end of 2013, as well as an
expense of EUR 58 million recognized in cost of sales, which relates to the
Düsseldorf-Benrath and Krefeld production facilities. In aggregate these items
amount to EUR 105 million.
(3) This column reflects the impact of the accounting policy alignment of the
historical financial information between Outokumpu and Inoxum. In this column
adjustments are made to arrive at comparable figures.
Adjustments to the Unaudited Pro Forma Interim Statement of Income for the Nine
Months Ended September 30, 2012
The interest expenses arising from the post-employment benefit plans
(pensions), EUR 16 million, and the expected return on plan asset, EUR 14
million, were transferred from operating functions to interest expenses and
interest income, respectively. The impact on both cost of sales and other
operating expenses amounted to EUR 1 million (net).
The actuarial losses recognized in other comprehensive income amounted to EUR
68 million and the related tax effect was EUR 19 million.
(4) This column reflects the differences in presentation of
financial statement items, thus adjustments are made to present Inoxum's
figures in a manner consistent with the Outokumpu figures.
Adjustments to the Unaudited Pro Forma Interim Statement of Income for the Nine
Months Ended September 30, 2012
Reclassifications of line items include the following major items:
-- Impact of the fair value changes arisen from the derivatives not under
hedge accounting: The reclassification of the fair value changes arising
from derivatives not under hedge accounting had an impact of EUR 10 million
on sales, negative EUR 2 million on cost of sales, EUR 24 million on other
operating income and negative EUR 32 million on other operating expenses.
-- Research and development expenses: These expenses, amounting to EUR 18
million, were reclassified from other operating expenses to be presented as
part of research and development expenses.
(5) This column reflects the adjustments arising from the Inoxum Transaction
and the provisional purchase price allocation.
Adjustments to the Unaudited Interim Pro Forma Statement of Income for the Nine
Months Ended September 30, 2012
The major adjustments were as follows:
-- Depreciation and amortization: The impact on depreciation and amortization
arising from (i) the fair value adjustments to the carrying amounts of
intangible assets and property, plant and equipment; (ii) the assets to be
assumed by Outokumpu as part of the Inoxum Transaction relating to
property, plant and equipment; (iii) certain finance leases; and (iv) the
write-downs on intangible assets and property, plant and equipment,
amounted in aggregate to EUR 2 million (net). The largest sub-item,
negative EUR 5 million, was from the amortization of the intangible assets
identified in the Inoxum Transaction. The impact of these adjustments is
presented under the cost of sales (EUR 1 million) as well as under
administrative expenses (EUR 1 million).
-- Interest expenses: Interest expenses related to the finance lease
liabilities arising from the assets to be assumed by Outokumpu as part of
the Inoxum Transaction amounted to negative EUR 3 million.
-- Deferred taxes: The impact resulting from the write-down of the deferred
tax assets of Inoxum on the income taxes in the unaudited pro forma interim
statement of income for the nine months ended September 30, 2012 amounted
to negative EUR 26 million, and on the income taxes relating to components
of other comprehensive income, negative EUR 15 million. This reversed the
increase of deferred tax assets recognized in the unaudited interim
statement of income for the nine months ended September 30, 2012 and in
other comprehensive income.
(6) This column reflects the impacts of the Remedy Adjustments.
Adjustments to the Unaudited Pro Forma Interim Statement of Income for the Nine
Months Ended September 30, 2012
The major adjustments were as follows:
-- Sales: The impact of the Remedy Adjustments amounted to negative EUR 1,072
million.
-- Cost of sales: The impact of the Remedy Adjustments amounted to EUR 1,088
million.
To reflect the impact of the Remedy Adjustments from the perspective of the
Combined Group, internal sales between Inoxum and the owner entities of the
Divestment Assets (sales of the Combined Group to the related companies) have
been reclassified to external sales. Previously, these sales of the Combined
Group to the owner entities of the Divestment Assets were eliminated in the
combined financial statements of Inoxum. The impact of this adjustment amounted
to EUR 29 million. The respective adjustment was made to cost of sales.
(7) This column reflects the impact of the Loan Note, which is part of the
consideration payable by Outokumpu to ThyssenKrupp as part of the Inoxum
Transaction.
Adjustments to the Unaudited Pro Forma Interim Statement of Income for the Nine
Months Ended September 30, 2012
The interest expense adjustment, negative EUR 40 million, was determined based
on the estimated principal amount of the Loan Note as at September 30, 2012.
The adjustment arisen from the fees related to the Revolving Backup Facility
agreement made to the other financial expenses amounted to negative EUR 4
million. The adjustment arisen from the fees related to the FSF made to the
other financial expenses amounted to less than EUR 1 million. The aggregate tax
impact associated with the adjustments related to the Loan Note, the Revolving
Backup Facility agreement and the FSF amounted to EUR 11 million.
(8) This column reflects the reversal of Inoxum's intra-group financing with
ThyssenKrupp as these financial assets and financial liabilities (net) will not
be assumed by Outokumpu as part of the Inoxum Transaction.
Adjustments to the Unaudited Pro Forma Interim Statement of Income for the Nine
Months Ended September 30, 2012
An adjustment amounting to EUR 48 million (net) has been made to financial
items. This relates to Inoxum's intra-group financing with ThyssenKrupp, both
to liabilities and receivables. The adjustment to both intra-group interest
income, negative EUR 11 million, and intra-group interest expenses, EUR 59
million, was based on the assumption that these receivables and liabilities
will be settled as part of the Inoxum Transaction. The related tax effect was
negative EUR 14 million.
(9) Pro forma EBITDA of the Combined Group
Outokum Inoxum Differ Differ PPA Impact Impact Reversa Pro
pu, for for ences ences adjust of of l of forma
the the in in - Remedy Loan Inoxum Combin
nine nine accoun presen ments( Adjust Note(7 intra-g ed
months months ting - 5) - ) roup Group
ended ended polici tation ments financi
Septemb Septem es(3) (4) (6) ng with
er ber Thyssen
30, 30, -
2012(1) 2012(2 Krupp(8
) )
-------------------------------------------------------------------------
(unaudited)
(EUR in millions)
Operat (167) (286) 2 0 2 85 - - (364)
ing
resul
t Deprec 173 145 - - (2) (50) - - 266
iation
and
amort
izatio
n
Impair 10 50 - - - (5) - - 55
ments
EBITDA 16 (91) 2 0 0 30 - - (43)
(*)
____________
(*) EBITDA = Operating result before depreciation,
amortization and impairments.
For further information:
Investors:
Kari Tuutti
tel. +358 9 421 2432, mob. +358 40 717 0830
Media:
Saara Tahvanainen
tel. +358 9 421 3265, mob. + 358 40 589 0223
Outokumpu Oyj
Outokumpu is the global leader in stainless steel and high performance alloys.
Our advanced materials are the ideal choice for demanding applications ranging
from cutlery to bridges, energy plants to medical equipment. Stainless steel
contributes to a sustainable and long lasting world as it is a 100% recyclable,
corrosion-resistant, maintenance-free, durable and hygienic material. Outokumpu
employs approximately over 16 000 professionals in over 40 countries, with the
Group's head office in Espoo, Finland and shares listed on the NASDAQ OMX
Helsinki. www.outokumpu.com
Disclaimer
This release does not constitute an offer to sell or a solicitation of an offer
to buy any securities in any jurisdiction. In particular, no securities are
being offered or sold, directly or indirectly, in or into the United States
pursuant to this release and neither the placement shares nor any other
securities of Outokumpu have been, or will be, registered under the U.S.
Securities Act of 1933, as amended (the “Securities Act”), or under the
securities laws of any state of the United States and, accordingly, may not be
offered or sold, directly or indirectly, in or into the United States, unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act and in compliance with any
applicable state securities laws of the United States.
The distribution of this release may, in certain jurisdictions, be restricted
by law. This release may not be sent to any jurisdiction in which it would not
be permissible to do so.
This release includes forward-looking statements within the meaning of the
securities laws of certain applicable jurisdictions. These forward-looking
statements include, but are not limited to, all statements other than
statements of historical facts contained in this release. By their nature,
forward looking statements involve known and unknown risks, uncertainties and
other factors because they relate to events and depend on circumstances that
may or may not occur in the future. Outokumpu cautions you that forward-looking
statements are not guarantees of future performance and are based on numerous
assumptions and that its actual results of operations, including their
financial condition and liquidity and the development of the industries in
which it and the members of its group operate, may differ materially from (and
be more negative than) those made in, or suggested by, the forward-looking
statements contained in this release.
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